Do I need a Business Plan?3rd June 2019
Motivating Employees24th June 2019
There are a lot of choices when it comes to the structure of a business. For example: sole proprietorship, general partnership, limited partnership, limited liability partnership (LLP) etc.
What can a limited company do?
- A limited company is viewed as a person in the eyes of the law, everything we can do they can do i.e. import/export, employ, borrow, lend, invest etc.
- A limited company is an entity in its own right
Set up as limited
- Owner and business are 2 separate individuals in the eyes of the law.
- Everything purchased/sold/money received belongs to Ltd. Company
Advantages of a Ltd. Company
- So long as your desired company name is available, you’ll have exclusive rights and protection to that name.
- Liabilities created – as long as no fraud has taken place, you will not be personally liable for any financial losses made by the business, if things were to go wrong.
- Transport of ownership
- When the owner wishes to stop working, business can be sold as a “trading entity” and get good will in the form of cash.
- Financial discipline
- Ltd company is governed by companies act and has specific deadlines for accounts, tax and other documents to be supplied to government authorities e.g. HMRC and companies house.
- This brings an important element of keeping information and books in order which helps create a seamless process.
- Tax saving
- Ltd company by nature normally saves tax compared to sole trader/partnership.
- As there is no National Insurance contribution on profits made by the Ltd company.
- The owner of the Ltd company could distribute its shares to other family members in order to save more tax.
- Ltd company is considered to be more organised, more financially disciplined and structurally sounder due to its legal status.
- Normally perceived that sole traders/partnerships are smaller businesses as they as less regulated compared with Ltd company.
Disadvantages of a Ltd. Company
- Strict regulation
- Ltd companies are set up under companies act 2006 and the activities of companies must comply with legal requirement
- In order to run a Ltd company usually you would need to engage a prof. accountant.
- Financial Cost
- The cost of running a business under Ltd company is more expensive compared with partnership/sole trader.
- g. for 1 director/shareholder company it would be ~ £500 more expensive than a sole trader business. However, comparing tax saving this additional cost should be covered.
- The tax saving from using a ltd company will make back the £500
- Strict due date
- Ltd company compliant regime is very strict, and any late submission will automatically generate a fine.
To find out more about Limited Companies contact us at Sterling Finance on 0161 339 4989 or email firstname.lastname@example.org.